Today’s tickers: GOOG, RIMM, VCLK, TJX, TAP, MEE, NSC
GOOG, RIMM – Options in cultural zeitgeist engine Google (GOOG) are a hot commodity today, trading on a volume of more than 102,000 within the first two hours of trading. This marks a second day of frenzied, bullish action in Google options, on speculation that a Google gPhone could be rolled out as soon as early next year, sending Google’s share price bounding past $700 . Heavy liquidity in strikes of 600 and up are seen today, with out-and-out call buying as high as the $680 strike in the front month. The giddy speculation has been accompanied by a big upside move in implied volatility, which two sessions ago was stable at around 30% and now exceeds 36%. We wonder if the encroachment of the gPhone could finally set a top of shares of Blackberry maker Research in Motion (RIMM), whose shares are down 2% today at $115.09, and where we saw something in the options activity that we haven’t seen in a good, long while – a surge in value for put premiums.
VCLK - Shares in online marketing ticker Valueclick (VCLK) gained 9.6% in early trading to $28.00 after CNBC’s Jim Cramer tipped the stock as an eminently eligible takeover candidate. Valueclick is sitting pretty, says Cramer, after Google and Microsoft made bids this year for its sector peers DoubleClick and aQuantive. Speculation over possible bids from the likes of Microsoft or Yahoo elicited a steep, 20% pickup in implied volatility to 81% this morning. Options are trading at 4 times the average rate today, with heavy liquidity in calls. Buyers and sellers flocked to the October 25 calls, which are commanding premiums of $3.40 today – a near doubling in value overnight. Liquidity has carried over into the October 30 calls, in step with a big build in open interest in this strike, which began last Friday. Also noteworthy is the buying interest in January 45 calls, where premiums are up 200% on the session, positioning for a bonanza in takeover premium in the event that Valueclick is bought out.
TJX – Clothing retailer TJX, meanwhile, the subject of so much diffuse chatter yesterday, continues to command spry call-side interest against a narrow, quarter-percent gain for shares to $29.72. Options are trading at a nine-fold multiple of the average, and implied volatility continues to creep up after yesterday’s 28% jag higher. This gauge of the market’s anticipation of up-or-down fluctuation now stands at 42.5%. As was the case yesterday, volume is heavily localized in cal buying at the October 30 strike, where nearly half of today’s option volume is seated.
TAP – Following this morning’s news that Molson Coors and SABMiler will merge their U.S. operations to cut costs and create synergies, option traders popped open the proverbial brewsky on Molson Coors’ contracts. Options on the ticker are moving at six and a half times the average, against a 10-plus percentage gain for shares to $56.03. The 7,800 contracts in play are the equivalent of roughly 16 of its open interest, and favor the calls by a factor of 2.4. Traders piled into the November 52.50 calls from the start of trading, which quickly increased in value to $5.10 – last Friday this contract was selling for 20% of today’s sticker price.
MEE – Coal producer Massey Energy (MEE) saw a 6% pickup in shares to $24.09 and an eight-fold increase in option volume following an analyst upgrade, who cited a favorable outlook for growth in third-quarter coal output. Today’s volume is characterized by heavy buying in the October 20 and November 25 calls. Massey has gapped below the S&P 500 energy index for the year-to-date, its share price having topped out at $44.34 in May of this year. Delta on the November 25 calls indicates a slightly less than 50/50 level of optimism that its shares can sustain the climb into November.
NSC - This morning’s earning miss by Norfolk Southern (NSC), the country’s fourth-largest railroad, elicited quick forgiveness from option traders. The company attributed its 5% shave in Q3 earnings to changes in Illinois tax law and unfavorable synthetic fuel investments – both deemed isolated events – aggravated by higher oil prices. With shares up more than 2% at $54.16, we observed fresh positioning in the January 55 calls, which traded to the middle of the market at $7.00. Buyers of this position are paying some 12% of today’s share price in the expectation that Norfolk Southern shares will break above $62 by New Year. We also observed selling in the October 50 puts against existing open interest at about a dime apiece.
Rebecca Engmann Darst
Equity options analyst/Financial Writer
